Economic impact study shows University Health System the largest contributor of all public-private hospitals

An economic impact study by noted economist and former LSU chair of economics Dr. Loren Scott outlines the economic impact of hospital privatization on the State of Louisiana and the 21-parish North Louisiana region primarily served by the University Health System (UHS).

The study, commissioned by BRF, owner and operator of UHS, shows that the privatization effort created the following impacts on the 21-parish North Louisiana region:

  • $1 billion in new sales
  • $400 million boost in household earnings
  • An average of 2,818 jobs per year
  • $18 million in local government treasuries from tax collections

In an earlier released study by Scott, the Baton Rouge-based economist detailed the economic benefits to the State by transitioning the former charity hospital system into public-private partnerships. According to Scott, since 2013, the eight public-private hospital systems have boosted the State’s budget by $2.7 billion at a time when the State has been grappling with budget shortfalls.

Scott’s study found that of the $2.7 billion budget boost, University Health System contributed the most of the eight public-private hospital systems. The study shows University Health System is responsible for $902.5 million of the $2.7 billion, or about 34 percent of the total.

Scott found that when Louisiana transitioned from a charity hospital system to public-private partnerships, there were three new revenue sources for the State.

The largest is lease payments that are being paid to the state by the private partners. At University Health System and other formerly State-owned health systems, the State retained ownership of facilities and equipment. The lease payments are eligible for matching federal money, called Federal Medical Assistance Percentages (FMAP).  A second way the State gained from the privatization of Louisiana’s charity hospitals was through payments made to physicians, which became eligible for FMAP payments. The third way the State benefited was through capital expenditures made by the private partners, which would have had to come out of the State’s treasury.

UHS contributions since 2013, totaling $902.5 million:

  • $383.2 million in lease and FMAP payments to the State
  • $461.1 million in physician FMAP payments to the State (41 percent of all physician FMAP payments made came from UHS)
  • $58.2 million in capital expenditures savings to the State (41.5 percent of all capital expenditures savings came from UHS)

Scott said that without privatization and this boost to the State’s budget, more cuts would have had to be made in the non-constitutionally protected areas of healthcare and education.

In addition to the significant economic boost to the Louisiana economy, privatization has improved the delivery of care to those most in need. Since the transition, UHS has made significant improvements including:

  • Reduced wait times (ER wait time reduced by 60 percent, referral queues from 12,000 to 1,200, MRI and CT wait times from 60 days to 1 day)
  • Expanded specialty services (advanced cancer radiation treatment with new Versa HD Linear Accelerator; incorporated latest treatments for heart failure, including the “Absorb” dissolving stent and Cryoablation cold therapy; and added the blood and marrow transplant program, the only within a 250-mile radius of Feist Weiller Cancer Center)
  • Improved quality (opening of new cardiac catheterization lab, additional operating room suites, renovated grounds and facilities)
  • Other improvements (transition to electronic medical records, improved billing collections by 44 percent, initiated community health programs)

“In 2012, prior to privatization, the state-run Shreveport and Monroe hospitals were losing more than $42 million. In 2013, BRF stepped up and took over the publicly run hospital at the request of LSU when no one else would. In 2016, University Health, a subsidiary of BRF, reported an $11 million profit with an operating budget over $500 million,” said Malcolm Murchison, BRF Chairman. “Dr. Scott’s study confirms the private partner hospital operators are providing the State of Louisiana billions of dollars at a time when it’s most needed.”

Click here to read the entire study.